Buying for profit; 10 ways to make sure your home keeps going up in value

There’s an old adage that you don’t make money when you sell your home, but when you first buy it. While that may seem nonsensical considering the big, fat closing check you get once it sells, but in reality, the ceiling (and floor) on your profit is first decided when you buy the home. Far from guesswork, there are a host of proven characteristics that will then determine if your freshly bought house appreciates in value over the years, and to what degree.

So when buying, it’s important to consider these factors to ensure that you make your money by buying correctly, delivering the most profit on your house long-term.

Proximity to parks, schools, and other daily conveniences.

Neighborhoods with parks, jogging trails, sports fields and other recreation areas are always attractive to future homebuyers. Likewise, look around for neighborhood grocery stores, gyms, doctor’s offices and hospitals, hair salons, banks, and gas stations in the vicinity when you’re considering buying a home. Drive around in a one-mile radius from your potential new home and check out the restaurants, pubs, cafes, coffee shops, boutiques, art galleries, and other establishments that add character to the community.

But there is no factor more important for predicting future home values that the quality of schools in the area. In fact, high-rated public schools help stabilize future values since young families, so concerned parents will always want to move there and that high-demand will help bolster home values.

Location, location…and you know the rest!

It’s been repeated so often it’s a cliché, but it also happens to be just as true as ever; location is maybe THE most important factor when buying a home. In fact, where your home is can help increase its future value a lot more than what it is. So look for a quality neighborhood above all else since homes in pleasant, safe, quiet, family- neighborhoods always do well when it comes time to sell. Just walk around and you’ll be able to spot signs of pride of ownership, like well-maintained lawns, freshly painted homes, decorated front porches, and other custom homeowner improvements. If you’re able to buy a house in a mature, high-end, or luxury community, you’re almost certain to make money as the values steadily rise over the years. On the other hand, being too close to a prison, halfway house, railroad tracks, or a waste facility may bring down your values no matter how nice your home is.

The higher the ceilings, the higher the home values?

Ceilings that are taller than average always make a home look and feel airy, open, and bigger, no matter how big or small the home really is. However, making your ceilings higher isn’t something you can practically undertake once you already own the home since hiring contractors to raise your ceilings can be incredibly expensive – or impossible. Instead, look for a home with high ceilings when you’re buying, at least 6 inches or even one foot taller than standard building code in the area. You’d also be wise to avoid homes with low ceilings, giving rooms a cramped or smaller look and limiting your potential future home value.

Outdoor living spaces pay big returns

Over the last few years, outdoor living and entertainment areas have been hot commodities, and that trend is expected to continue as people look for usable spaces that allow them to have shared experiences, not just vast and empty lawns. So if you can find a house with nice sitting areas, old-fashioned wrap-around porches, gazebos, outdoor kitchens, or any number of areas to entertain and spend time with family and friends, you’re future values are in good hands.

The caveat to that is that if you’re considering buying a home with a swimming pool, built-in hot tub, or sports courts (like tennis or basketball courts), data shows that they won’t increase the value of the home. In fact, they actually may turn off a certain portion of buyers who don’t want to deal with the maintenance, liability, or expense – or just plain won’t use them.

Natural light brightens up your future home value

When you’re out looking at homes, pay attention to the amount of natural light each one receives in the main living spaces. Natural light always makes your home look bigger, more airy and open, and is flatting to any artwork or décor inside. Of course, you can just switch on light bulbs if a room is dark, but that's never the same. With good natural light, your home's worth will be easy to see when it's time for future buyers to walk through and form a first impression.

Plenty of square footage (but not the largest home in the neighborhood)

Spacious and roomy homes with plenty of square footage are always in demand, but just how much square footage is considered big depends on the neighborhood. But no matter what, it’s never a good idea to buy one of the smallest homes on the block, as the values won't rise like it should. You can easily remodel and upgrade the condition of a house, but adding square footage is so costly and time-consuming that it's usually not worth it.

Flowing, open floor plans

Having a cavernous mansion is one thing, but it’s perhaps more important that it’s planned and laid out correctly. Call it Feng Shui or just good design sense, but single story homes with open, flowing floor plans and great room concepts always do well when it comes to resale value. You also should try to buy a home with at least 3 bedrooms and at least 2 full baths, because any smaller than that and it won’t be attractive to families and young couples that are buying and looking to grow into it. The exception to this is buying in older neighborhoods where most of the homes only have two bedrooms and one bath, for example.

An abundance of comparable homes in the area

It may seem like a good idea to buy a home that really stands out from others in your area (especially since the price tag is probably lower than others in the neighborhood), but in reality, its uniqueness will probably only hamper your future value. Maybe it’s too small, too big, has a classic Roman fountain in the front yard, or has a homemade addition, but whatever the trait that makes it different, it will have little or no comparable properties to boost its value over the years. You never want the biggest or the smallest home in the neighborhood, and this is also true for funky or unique construction, so instead look for a home that has plenty of comparables when an appraiser does their valuation.

Hardwood floors add value and never go out of style

Some things never go out of fashion, and hardwood floors are one of them. While carpet wears out and gets dingy, tile in the whole house looks cold and antiseptic, and linoleum is just, well…linoleum. But as hardwood floors age, they only get more richness and character. Even when hardwoods do start to dull and get scratched up, they’re super easy to refinish and recolor before you move in – or sell – your home.

Focus on the kitchens and bathrooms

No matter which design trends come and go, homeowners will always want big, functional and nice kitchens. These days, kitchens are perhaps the most popular room in the house, a center point for all family happenings. Therefore, well-designed and open kitchens are always a positive when it comes to resale value. The same can be said for bathrooms, with the one exception that bathrooms are must subject to the whims of current popularity that dictate what's in and what's not. But sinks, fixtures, lighting, flooring, and even tile are relatively easy to upgrade in a home, but the space and layout of a bathroom (and having enough of them!) are always fundamental for ensuring your value down the road.

10 Costly mistakes sellers make when pricing their homes.

1. Being too emotional.
We understand that your house is your home, where you raised you family and have a lot of your life invested. But selling your home should be viewed as a business transaction, not personal. By taking emotion out of the process as much as possible, you’ll make clear and rational decisions in your best interest. Ask any successful businessperson and he or she will tell you that emotion, fear, anger, ego, and personal feelings end up costing you money!

2. Pricing it unreasonably high.
Of course the ultimate goal is to get as much money for your home as possible when it sells, but that’s not going to happen if it never sells! There’s nothing wrong with starting with a listing price on the higher end of the spectrum but home owners need to realize that the higher the price, the fewer potential buyers you will get and the longer it usually takes to sell, if at all.

3. Ignoring the “price tag” test.
Let’s say you walk into your favorite store and pick something beautiful up off the shelf. What’s the first thing you do? Look for the price tag. If it’s too high, you cringe and put the item it right back on the shelf. If the price is significant but fair, you may look it over a while as you deliberate the price versus value. But if it’s on sale, you run to the register before someone else snatches it up! It’s the same thing with selling your home. When your priced way too high, people aren’t even going to look at it, or put it right back on the shelf. That means no offers. You want your price to be in that midrange where it’s fair for the value so you attract plenty of buyers but also get the most money possible.

4. Not sparking a bidding war.
Sellers often forget that one of the best strategies is to price your home aggressively to create a bidding war. Psychologically, our consumer behavior is dominated by a fear of loss even more so than the hope for gain. Put simply, that means people will move, act, bid, offer, hustle, risk, and do just about anything to ensure they don’t lose out on a great deal. By pricing your home a little lower on the range of what’s fair and reasonable, you create a massive sense of urgency with potential buyers. They know others are looking at this great deal and they need to put in the highest possible offer to get the home. You’ll probably get multiple offers, which can be leveraged against each other to bring the listing price up even more. Done correctly, a bidding war will get your home sold quickly and yield fantastic offers – often well over asking price!

5. Not listening to the market.
When we list a home, we do a comprehensive market analysis to present to the seller, showing the hard data exactly what similar homes in the same area are selling for, as well as what other competition is out there. We’ll make our best professional recommendation on the listing price, but the final decision is up to the homeowner. No matter where you set your initial listing price, pay attention to what the market is telling you – what the data says. Ignoring this and making decisions on emotion, fear, or hope for gain can be very counterproductive and cost you in the long run.

6. Not realizing price reductions can work to your advantage.
Price reductions are often viewed as nails-on-chalkboard negative by home sellers, but in fact they are a valuable strategy that ensures they yield the highest possible sales price. When listing your home, we should set an initial price aggressively but also map out a strategy and timetable of price reductions. If there is little interest or offers within a certain time frame, it’s time to reduce the price until we find the “sweet spot” of price vs. value! Once you price your home in that sweet spot, you’ll get plenty of quality offers at the best possible realistic price, and actually close on the transaction. Handled correctly, price reductions are a great tool to test the market incrementally, create momentum, and make sure every possible dollar lands in your pocket when it sells.

7. Forgetting to think from a buyer’s perspective.
Instead of thinking, “This is what I want for my home,” and “I want to sell at this price,” try to put yourself in a potential buyer’s situation. Imagine yourself hitting the home buying circuit on a busy Saturday and how you would view each listing. For instance, buyers usually start from the bottom of their price range and then work their way up, and as a home seller, realize they will be viewing a lot of other listings in the same price range as your home – your competition. Understanding the process from a consumer’s perspective will help you strategically set your price to get the highest and best offers from those busy buyers!

8. Pricing it based off the wrong comparables.
Homeowners are eternally optimistic when it comes to selling their home at the highest possible price, but often times they are using incomplete or irrelevant data to make those decisions. You’ll often hear people say, “My neighbor sold their house recently and it went for XYZ price, so mine should at least be worth that, if not more.” But crunching the numbers, we might find that their neighbor’s house was much larger or sold two years ago. When gauging your home’s value, look for comparable sold properties that were most similar to yours in square footage and amenities, close or in the same neighborhood, and those that sold most recently. That should give you the most accurate representation of what the fair and realistic listing price should be.

9. Forgetting that the home will need to appraise.
Remember that a buyer can make any offer they want, but they most often will need to get a mortgage loan from their partner in the home purchase – the bank. The bank, looking to ensure their investment, will require an appraisal. Appraisers are in the business of rationally and logically valuing homes based on every possible factor, and know the market better than just about anyone. So when you set your listing price, remember that what you want for it isn’t as important as what it will appraise for – which sets the ceiling on what any buyer can and will pay.

10. Trying to inflate the price based on upgrades.
You’ve probably spent many weekends fixing up your home, painting, installing new tile floors, and upgrading all of the light fixtures. While these improvements do enhance the value of your home, don’t expect to get back what you put in dollar-for-dollar. Some upgrades pay off big – like remodeling kitchens and bathrooms- but you can’t automatically tack on the price of all renovations and upgrades to your listing price and expect the seller to go for it. They will, however, make your home much more attractive to potential buyers when you list the home, and that will yield more offers at higher prices.

The 25 Biggest Mistakes Home Buyers Make.

1. Over borrowing:

Homebuyers sometimes get caught up in the frenzy when searching for homes and start putting offers down for much more than they can afford.  Your dream home will be a nightmare if you can’t really afford it!

2. Underestimating home improvement costs.

The rule of fixing up or remodeling a home is this – expect it to take twice as long and go double the budget as planned.  The little things – towel hangers, window treatments, and doorknobs can add up to big bucks and once you get started you won’t want to stop!

3. Estimating initial moving and settling costs.

It usually costs more than anticipated to pack up your former home, get everything moved, and settle into your new home.  Those quick trips to Target and Bed, Bath & Beyond can add up faster than anticipated!

4. Buying the ‘outlier’ house.

It may seem like a good deal at the time but you’d be wise to avoid the biggest home on the block, the house with the funky floor plan, houses with garage or patio additions, or any strange characteristics that may come back to bite you when you try to resell. 

5. Don’t buy out of frustration.

Putting offers down on homes and not having them accepted can get super frustrating, especially in market with tight inventory.  Stay cool, calm, and collected when buying a home – anticipate that it could take months of searching and during that time you stick to it like any other financial plan, not an emotional purchase. 

6. Don’t be over cautious.

Buying a home can be such an intense and overwhelming process that buyers sometimes suffer from ‘paralysis by analysis,’ scrutinizing every single decision and losing so much sleep over it that they shut down from fear – often losing out on great deals and opportunities.

7. Not listening to the market.

If you want a mansion for $200,000, by all means go looking, but if there just aren’t any mansions anywhere near that price then the market is telling you something.  Listen to it.  Just like sellers need to adjust their strategies and do price reductions based on market conditions, so too should buyers make sure their expectations are realistic. 

8. Don’t buy just on price.

Getting the lowest possible price doesn’t mean you got a good deal if you’re not happy in the property.  Price is one factor but remember that finding the house you love and want to stay in for as long as possible is what really determines the overall value of a real estate transaction.

9. Don’t buy too small.

If they say “location, location, and location,” are the biggest factors when buying a home, I’ll add a fourth, “square footage.”  It’s easy to remodel and fix up a home but it’s difficult and incredibly expensive to add square footage – and your house will always be worth what similar square footage floor plans are going for.

10. Not talking to your CPA.

Even if it’s not tax time, communicate with your CPA or tax preparer before and after the real estate transaction.  When you close on the house, what you can write-off, and other strategies may save you a lot of money –or cost you – so it’s important to get your tax professional in the loop.

11. Listening to the wrong advice.

The moment you start the buying process (or selling) it will seem like everyone is an expert and has advice for you.  Be careful who you listen to – unless someone is a successfully and wealthy investor or real estate professional, you might want to take their advice about the market, interest rates, and the economy with a grain of salt – or block it out all together.

12. Not using your agent to the fullest.

As a buyer’s agent we work for YOU and only you, so please utilize our services to the fullest.  Ask questions, discuss strategy, and share any thoughts, circumstances, or factors that are influencing your home buying decisions.  We are on the same team so we love it when a client sees it as such so we can work to get them their dream house!

13. Not getting fully prequalified first.

Buyers are wasting their time and precious money if they don’t go through the complete process of getting preapproved with a lender before they start looking at homes and putting down offers.  Don’t worry – it’s painless with a good lender and you’ll feel empowered by knowing exactly what you can afford and how much your future payment will be.

14. Not looking at your credit score 6 months ahead of time.

It’s a good idea to get a copy of your credit report 6 months or more before you’re ready to even start the home buying process.  Up to 40% of credit reports have some sort of errors, and surprises, duplicates, or even identity theft are very fixable – but can take time.

15. Overpaying for charm.

I know you love the tiny, overpriced home because the bathroom and kitchen are remodeled, but please realize that’s the exact reason it’s overpriced!  Cosmetic remodeling and basic redesign like paint, flooring, landscaping, fixtures, and tile are weekend projects that shouldn’t make you toss your buying strategy out the window.  Too often, buyers pay too much for small homes that have been remodeled – a big ‘no-no.’

16. Not looking at the neighborhood.

Remember that you’re not just buying the home but you’re buying into the neighborhood, and while you can remodel and change your home, you have no control over your neighbors.  Walk the neighborhood, talk to a few neighbors, ask questions, look at reports, and go by at night or on weekends a few times.

17. ‘Shotgunning’ unrealistic or non-serious offers.

Just like some buyers suffer from ‘paralysis by analysis,’ others become too aggressive, shooting off offers like they were flying paper airplanes.  As a general rule of thumb, don’t submit an offer for a property unless you will be happy – and willing – to go through with the transaction if it’s expected.

18. Not thinking long-term resale.

Yes, you have to pay more for a great property, but that value will grow under your care, allowing you to cash in even bigger when you sell it down the road.  The better the property, the better you take care of it, and the longer you hold it, the more cash it will put in your pocket.

19. Thinking the Good Faith Estimate is set in stone.

Remember that it’s just an estimate, and what time of the month you close and other factors can swing your actual closing costs widely higher or lower.  Expect variations and keep a cushion so you won’t be out of money after the closing.

20. Not negotiating.

Everything is negotiable!  Of course you don’t want to waste everyone’s time by asking for the bizarre or ridiculous, but don’t be afraid to bounce back with reasonable counteroffers that “sharpen the pencil” on terms and conditions.  The longer you keep a seller (or buyer) negotiating, the more invested everyone becomes in the deal so it can get done!

21. Waiving a home inspection.

If there is a #1 mistake buyers make, this would be it.  Not getting a home inspection is like buying a million dollar racehorse without checking to see if it has bad knees.  You’re not saving a few hundred dollars – you’re taking on huge amounts of liability, future costs, and disappointment in the future.  Get a home inspection, and carefully review your pest inspection, disclosures, and possibly a roof certification with your agent. 

22. Falling in love with one house.

It’s easy to become emotional about the “one” house that was just “meant to be,” only to become distraught when you don’t get it but remember – a lot of other people are out there buying with the same sentiment in mind.  Think of the home buying process as a long term financial transaction and you won’t feel married to just one house. 

23. Making contingent offers.

Though less prevalent these days, an offer that’s contingent on you getting your home before closing might have more pitfalls than benefits.  Be sure to go over the pros and cons of contingent offers – and other options - with us before you get too excited and sign on the dotted line. 

24. Not understanding short sales.

Over the past few years, buying a short sale resulted in great deals for a lot of buyers, but it’s so important to understand the nature of the transaction before you jump – from timing to costs to what it will be like to deal with the bank.

25. Expecting to find everything on your wish list.

When we first meet and start talking about the ideal home you have, broken down into a wish list, I’ll encourage you to prioritize what’s most important in a home from 1-10.  It’s almost impossible to find absolutely everything you wanted in a home, but if we find the most important factors – price, neighborhood, size, floor plan, etc. then the minor, end-of-the-list details will be forgotten by the housewarming party!